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Scaff v. Ralcorp Holdings

November 3, 2006


The opinion of the court was delivered by: Herndon, District Judge


I. Introduction

Before the Court is a motion submitted by Plaintiff Steven Scaff to remand this case to state court. (Doc. 9.) Defendants Ralcorp Holdings, Inc. ("Ralcorp") and Parco Foods, LLC ("Parco") (collectively referred to as "Defendants") respond in opposition. (Doc. 20.) In addition, Defendants have submitted a motion to transfer this lawsuit to the United States District Court for the Northern District of Illinois, Eastern Division. (Doc. 15.) Plaintiff has not responded to this motion. For the following reasons, the Court denies Plaintiff's motion to remand and grants Defendants' motion to transfer.

II. Background

Plaintiff was an employee of Parco from June 2002 until February 2006. Parco is a producer of cookies for the in-store bakery and food-service markets in the United States and Canada. When Plaintiff began working for Parco in June 2002, he signed a "Key Employee Commitment" agreement, which contained confidentiality, non-competition, and non-solicitation provisions. In February 2006, Ralcorp purchased Parco. At that time, Plaintiff's position with Parco was eliminated. Following his termination, Plaintiff formed Heartland Bakery LLC and decided to purchase a closed bakery plant in Du Quoin, Illinois. On May 17, 2006, Plaintiff received a letter from the president of Ralcorp notifying Plaintiff that he is "prohibited from using or disclosing any confidential information [he] obtained during [his] employment with Parco" and is "precluded from engaging in certain competitive activities against Parco" under the Employment Agreements and advising that Defendants would take legal action to enforce the agreements (Doc. 2, Ex. B, ¶¶ 2, 3, 6.) In response, Plaintiff filed this declaratory judgment action in the Circuit Court of Perry County on May 30, 2006 seeking a judgment 1) declaring the Key Employee Commitment void and unenforceable against Plaintiff; 2) declaring that Plaintiff's employment with Heartland Bakery LLC does not violate the Key Employee Commitment; and 3) enjoining Defendants from taking any action, by litigation or otherwise, to hinder or prevent Plaintiff from pursuing his employment with Heartland Bakery LLC. On July 10, 2006, Defendants filed a timely Joint Notice of Removal based on diversity jurisdiction pursuant to 28 U.S.C. § 1332(a). (Doc. 2.) On July 25, 2006, Plaintiff filed a timely Motion to Remand arguing that the amount in controversy is less than $75,000 and, therefore, the Court lacks subject matter jurisdiction. (Doc. 9.) Defendants disagree. Defendants argue that the value of a judgment declaring the employment agreements void and unenforceable well exceeds $75,000 to both Plaintiff and Defendants, individually. Furthermore, on August 3, 2006, Defendants filed a Joint Motion to Transfer Venue to the United States District Court of the Northern District of Illinois, Eastern Division, where two other related actions are pending. (Doc. 15.) Plaintiff has not responded to this motion.

III. Analysis

A. Plaintiff's Motion to Remand (Doc. 9)

1. Amount in Controversy

A defendant may remove a case only if a federal district court would have original jurisdiction over the action. See 28 U.S.C. § 1441; Caterpillar Inc. v. Williams, 482 U.S. 386, 392 (1987).*fn1 Statutes providing for removal are construed narrowly, and doubts about removal are resolved in favor of remand. Doe v. Allied-Signal, Inc., 985 F.2d 908, 911 (7th Cir. 1993). Plaintiff does not dispute complete diversity of citizenship. In Plaintiff's motion to remand, he asserts that the "cost to defendant to enforce the covenant would not exceed $75,000" (Doc. 9, ¶ 5) and that the "value to Plaintiff to have the covenant declared invalid is entirely speculative" (Id., ¶ 6).The burden of establishing jurisdiction in the federal courts falls on the party seeking removal. Doe v. Allied Signal, Inc., 985 F.2d 908, 911 (7th Cir. 1993).

In declaratory actions, such as this case, "it is well established that the amount in controversy is measured by the value of the object of the litigation." Hunt v. Washington State Apple Advertising Comm'n, 432 U.S. 333, 347 (1977). Furthermore, in the Seventh Circuit, the value is calculated from either party's point of view. See In re Brand Name Prescription Drugs Antitrust Litigation, 123 F.3d 599, 610 (7th Cir. 1997). Although the burden rests upon the proponent of federal jurisdiction, "the sum claimed by [the proponent of federal jurisdiction] controls if the claim is apparently made in good faith. It must appear to a legal certainty that the claim is really for less than the jurisdictional amount to justify dismissal." St. Paul Mercury Indemnity Co. v. Red Cab Co., 303 U.S. 283, 293 (1938).

Defendants contend that a judgment declaring the employment agreement void and unenforceable would allow Plaintiff the freedom to engage in competitive activity armed with confidential information that would give Plaintiff a competitive advantage; this alone, Defendants argue, is valued at far more than $75,000. The confidential information includes "non-public information relating to Parco's pricing and discounting structures, financial information, customer accounts, product formulas and recipes, sales and marketing plans, future business plans, including research and development efforts, as well as other valuable information relating to Parco's business and operations." (Doc. 2, p. 6.) Furthermore, Defendants posit that if a court finds the employment agreement unenforceable and allows Plaintiff to proceed with his business plans, Defendants could stand to lose millions of dollars in existing customer accounts. Lastly, Defendants maintain that the outcome of this action will determine whether Plaintiff's compensation is subject to forfeiture. The total value of Plaintiffs compensation from June 2002 to February 2006 is $390,265. All of these arguments are supported by the affidavit of Cheryl M. Jekiel, Vice President and General Manager, ISB Sales and Marketing for Ralcorp Frozen Bakery Products, which was attached to Defendants' Notice of Removal. (Doc. 2, Ex. C.) Although the exact amounts are uncertain, the Court bears in mind that unless it appears to a "legal certainty" that the amount will not exceed $75,000, jurisdiction should not be denied. Defendants have established that the outcome of this litigation, to either Plaintiff or Defendant, is of a value that far exceeds the amount in controversy requirement. Therefore, Plaintiff's motion to remand is DENIED.

B. Defendant's Motion to Transfer (Doc. 15)

Defendants also seek to transfer this case to the United States District Court for the Northern District of Illinois, Eastern Division, pursuant to 28 U.S.C. § 1404. Plaintiff failed to respond to Defendants' motion. According to the Southern District of Illinois Local Rule 7.1(g) "[f]ailure to file a timely response to a motion may, in the court's discretion, be considered an admission of the merits of the motion." The Court considers this omission to be significant, particularly given the weight usually given to a plaintiff's preference under the Court's transfer of venue analysis. The Court can only interpret Plaintiff's silence as at least partial acquiescence to Defendants' request. Nevertheless, the Court will briefly discuss the other factors that weighed into the Court's decision to grant Defendants' motion to transfer.

Section 1404(a), which governs the transfer of an action from one federal district court to another, provides: "For the convenience of the parties and the witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division where it may have been brought." 28 U.S.C. § 1404(a). The purpose of § 1404(a) "is to prevent the waste of time, energy and money and to protect litigants, witnesses and the public against unnecessary inconvenience and expense." Van Dusen v. Barrack, 376 U.S. 612, 616 (1964). A transfer under ยง 1404(a) is appropriate if: (1) venue is proper in both the transferor and the transferee court; (2) transfer is ...

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